Geography: Palestine could be formed from what is currently the occupied territories of the West Bank and the Gaza Strip. But the Gaza Strip is already over-crowded and extra territory would have to be provided to allow for inevitable population expansion.

Jerusalem is a subject of great contention, but it could be the joint capital of Israel and Palestine, with East Jerusalem in Palestine and West Jerusalem in Israel. The inhabitants of Jerusalem would be either Israeli or Palestinian citizens depending on which side of the border they were born.

Main Language: Arabic.

Population: Mainly Arab - though there would be some Jews if Jewish settlers stayed in what are now the occupied territories.

Citizenship: Everyone whose family originates from Palestine would have the right of citizenship and residence in the State of Palestine. But it is unlikely that existing resources in the territories would be able to support all Palestinians if they returned home. Some might prefer to remain abroad - at least initially.

Religion: Palestinian national identity is based on the commitment to a piece of land rather than to a religion, so there would be no State religion. According to the present distribution of faiths among Palestinians in the territories, Moslems would predominate, followed by Christians - with the probable addition of some Jews.

Economy: Palestine would probably follow a fairly liberal economic policy - allowing for free movement of capital and for private initiative. It would need to receive large amount of aid from the League of Arab States, Europe and the US for an interim period while it developed its infrastructure.

Imports and exports would have to pass through Israel and Jordan. So to ensure its independence the country would aim for food self-sufficiency. This would mean intensive cultivation of all land. But it should still be possible to produce export crops like fruit and vegetables.

Food processing is likely to be among the most important industries at first - since there is little other than industry at present and the country would have few natural resources other than fertile land and water.

Palestinians have the advantage that they tend to be highly educated: education is one of the few things they have been able to invest in since losing their land. So, given capital investment, they should eventually be able to build up fairly sophisticated computer-based industries - probably for markets in the Arab world, the European Community and the Eastern Bloc.

Tourism should also provide a major source of income. And there will also be earnings from Palestinians working abroad, many of whom already remit money to their families.

Politics: The Palestine National Council (Palestinian Parliament) sees the country as a democracy. The four main political groups now operating in the territories would become political parties. Fatah is the largest and would probably form the Government, pursuing a 'liberal democratic line. The main opposition Party would be the Popular Front for the Liberation of Palestine (a Marxist group). Other Parties would be the Democratic Front for the Liberation of Palestine (also Marxist) and the Palestinian Communist Party.

International alliances:The main allies would be from the Arab world. Palestine would be a member of the League of Arab States. But the country would also have strong ties with Europe and the West while maintaining good relations with the Soviet bloc.

Armed forces: Palestine would probably be policed by the United Nations for an interim period while trust is built up with its neighbours. Thereafter it would have its own army - though it is hardly like to be an aggressive one since the country would be dependent on the goodwill of its neighbours (especially Israel through which Palestinians would have to pass to get from one side of their state to another).

Culture: Palestine would be predominantly Arab. It would share the national and cultural symbols of the Arab world.

ISRAEL

Geography: Israel's borders would be defined for the first time ever - after handing the occupied territories to Palestine. It might then take West Jerusalem as its capital. Good relations with Palestine would be essential because one-third of Israel's water currently comes from the West Bank. Israel's own stability will depend on that of its neighbours so it is essential that any Palestinian State is politically and economically viable. This means defining the borders in a way which gives a Palestinian State the best possible chance of survival.

Main Language: Hebrew.

Population: Around four million. Mainly Jewish Israeli with some Israeli Arabs. Some Jewish Israelis would probably remain in Palestine since it is unlikely that Israel could physically remove all settlers from the occupied territories. The Israeli Arab population is growing. Israel must decide whether it will accept being an Arab-Jewish State, or find a way of preserving its Jewish identity.

Citizenship: Every Israeli would have the right of citizenship and residence in the State of Israel. The Law of Return (entitling Jews all over the world to become Israeli citizens) would probably remain for a time. But as the need to reconcile problems between Jewish citizens from different cultural backgrounds became more pressing, it could easily fall into abeyance.

Religion: Judaism would continue as the State religion - Israel would be the Jewish State. But there would also be some Christians, Moslems and Druze.

Economy: Israel's ailing economy would improve, after the creation of a Palestinian State because the new country would offer fresh markets for Israeli products. Also Israel would be able to reduce its current heavy military expenditure and become less dependent on foreign aid. However for it to demilitarize internally would require that the country find a way of altering its industrial base away from weapons-related products. If it could, business, health, education and culture would improve considerably.

Politics: Israel would remain a multi-party democratic State.

But its identity would change through the creation of a Palestinian State. Giving up territory would require a major shift in Israel's fortress mentality and once a Palestinian State had been created this might remove the unifying effect of the common struggle against the Arabs. Israel would be forced to deal with its own internal problems - particularly those of assimilating migrants from many cultures These changes would be advantageous in the long run, for they would bring a more moderate and less polarized political climate to Israel.

Main allies: Israel would remain aligned with the West. But the creation of the Palestinian State would improve relations with its Arab neighbours. Relations would also be improved if dependence on US aid could be reduced, allowing Israel to be seen less as a US puppet and more as a country in its own right.

Armed forces: Israel would continue to have its own army - though not so large and possibly without the need for conscription.

Culture: The existence of a Palestinian State next door would require the Israeli Government to help the Israeli Arab minority feel it had a genuine participation in the State. The Arab minority community could provide a bridge into the Arab world.

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